Gold/Mining/Energy : McEwen Mining
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To: huntforvalue who wrote (2179)11/2/2012 12:18:39 PM
From: huntforvalue2 Recommendations   of 19316
-- Will dividends from 49% San Jose be sufficient from cover McEwen Mining's exploration & development expenses in Argentina? --

Mr McEwen has repeatedly said that the motivation for merging Minera Andes & McEwen Mining was to internally fund the development of El Gallo. However, as I had pointed out previously, such as goal was completely unrealistic even if there were no issues with removing USD from Argentina. The roughly $10m per quarter dividend from 49% San Jose would only be sufficient to fund explorations expenses and corporate G&A. Now the question turns to is the proceeds from 49% San Jose sufficient to fund the exploration & development operations in Argentina? According to Hochschild Mining's interm conference call, the San Jose mine (aka Minera Santa Cruz - MSC) does not expect to accumulate excess cash within Argentina for the remainder of 2012 and will primarily use cash-flow-from-operations to fund development at San Jose and pay-down short-term debt which stood at $25m to $35m at the end of 2Q2012.

Now we see disclosed in the recent prospectus for the Rights Offering within the section "USE OF PROCEEDS" that a portion ($5m) of the $60m proceeds will be used to fund exploration at Los Azules in Argentina. In other works, management at McEwen Mining also has doubts whether the San Jose mine will be distributing enough excess cash to internally fund operations in Argentina. So much for trying to take USD out of Argentina because it looks like we will be bring fresh new USD into the country.

According the recent McEwen Mining conference call we should hear news next week regarding how much Q3 dividends were distributed from San Jose (Minera Santa Cruz) to our Argentina subsidiary, Minera Andes SA.

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